Market Predictions for 2019
When you are in the financial services business, predictions about what the markets will do are everywhere. People are constantly trying to tell you (and sell you!) their predictions, and people often ask us for ours. The problem with predictions from experts is that they are often very very wrong.
Back in January of 2018, this interesting article came out about market predictions for 2017, and how wrong the “experts” were. It is a worth a reread as we head into 2019. Of special note is this observation from the article about how financial markets continue to surprise investors,
“Financial markets surprised many investors in 2017, but then again they have a long history of surprising investors. For example, from 1926–2017, the annualized return for the S&P 500 Index was 10.2%. But returns in any single year were seldom close to this figure. They fell in a range between 8% and 12% only six times in the last 92 years but experienced gains or losses greater than 20% 40 times (34 gains, six losses). Investors should appreciate that many times realized returns may be far different from expected returns.”
On top of this article, we now have another year of data, and 2018 predictions we can examine and hold up to reality. If we examine the 2018 Wall Street S&P 500 Forecasts, we can see that no one predicted where the S&P would accurately be at year end. All of the estimates tracked predicted the S&P finishing up 2018 well above where it finally closed out the year. Of course, it being the new year, 2019 predictions and revisions are already in full swing.
Wanting predictions is completely natural. If only we could predict what the stock market will do, we could capitalize on it and make our rate of return soar. However, in reality, we know that it just doesn’t work that way. The key to controlling this urge is to remind ourselves how wrong these predictions can be and to doggedly stick to the individualized investment strategy we have developed by looking at your risk tolerance, your time horizons, and your goals and objectives.